Union Budget 2026 offers no 8th Pay Commission salary hike, but DA and DR may rise 2%, with major financial impact expected only from FY2028.
Could the 8th Pay Commission Cause Higher Salary Costs Post-Union Budget 2026
8th Pay Commission: The Union Budget 2026, which was presented on February 1, 2026, did not have any direct news regarding a salary hike under the 8th Pay Commission. Although many central government employees were eagerly waiting for some news, it was already expected that the Budget would not have any direct news regarding a salary hike. It is a general practice that the government waits for the Pay Commission to finish its work before making any financial commitments.
There is some good news for employees and pensioners. As per the Labour Bureau’s data for December, the Dearness Allowance (DA) for central government employees and Dearness Relief (DR) for pensioners will increase by 2% each. Although it is not a big salary hike, it is some relief in times when the cost of living is increasing.
The 8th Central Pay Commission (CPC) has been formed very recently and is still in the initial stages of its proceedings. It takes time for pay commissions to finalize their recommendations. They study the existing pay structure, hold discussions, and assess the economic scenario before finalizing their recommendations. This takes around 16-18 months. Until then, the government is not likely to make any changes in salaries, and hence, there were no announcements regarding pay hikes in the Budget.
While it is possible that the Budget might contain estimates regarding future salary expenditures, this is not likely to happen in 2026, as the recommendations are not yet ready. Currently, the focus of the government is on capital expenditure (capex), which comprises outlays on roads, railways, and other infrastructure schemes. Rating agency ICRA forecasts an increase of 14% in capex to ₹13.1 trillion, as the government aims to increase development expenditure before incurring higher fixed costs, such as salaries due to the 8th Pay Commission recommendations.
The actual financial effect of the 8th Pay Commission is expected to be felt in FY2028, as per ICRA. Starting FY2028, the salary outgo is expected to rise substantially, thereby impacting the financial flexibility of the government. If the recommendations of the Pay Commission are given retrospective effect from January 1, 2026, the government may have to shell out arrears for 15 months, which could result in a 40-50% increase in salary outgo in FY2028. This would be a substantial burden on the government’s committed expenditure and may affect expenditures on other projects, including infrastructure, even in FY2029.
